F/MC Watch: A New Step in the Right Direction?

Fixed-mobile convergence (F/MC) may be closer to market reality in North America than many people think. Or so says NewStep Networks Inc., the Toronto-based developer of F/MC software solutions for carriers and enterprises.

NewStep has had some promising early success selling its technology-agnostic service platform to carriers, including Embarq, the new Sprint local phone service, and British Telecom.

More recently, the company announced successful testing of Voice Call Continuity (VCC)the 3GPP (3rd Generation Partnership Project) term for Wi-Fi/cellular handoffusing the NewStep platform and a dual-mode CDMA handset from Japanese cell phone maker Kyocera Corp. NewStep believes that F/MC is more than just Wi-Fi/cellular handoff, especially in the short term, but it's clearly still an important part of what the technology offers.

"Because the European [F/MC] market is moving more quickly, we're seeing lots of GSM handsets with these capabilities," says the company's chief marketing officer Craig Gosselin. "But Kyocera is the first with a VCC-compatible CDMA handset, and that's obviously important to the North American market."

Embarq has been using the NewStep platform to offer its hosted Smart Connect service which gives customers a single number that works for both wireline and wireless with simultaneous ringing, a single voice mail box and one-touch transfer of calls back and forth between mobile and wireline servicestransparent to the other party on the call.

British Telecom (BT) is offering enterprise customers a managed service in which it installs a server running one NewStep's CSN30 software platform on the customer's premises. In the enterprise environment, the NewStep technology adds the ability to use mobile handsets as PBX extensions.

The company has two more as yet un-announced customers. One is a major European carrier. It will offer a consumer-targeted F/MC service that stresses the Wi-Fi/cellular handoff feature. The other is a large system integrator with an enterprise client for which it plans to implement an in-house system similar to the ones BT is providing for its customers in Europe. NewStep expects to officially announce the new customers within 60 days.

The F/MC market is moving at different speeds in different regions, Gosselin says. Europe is the fastest, followed by North America. Asia-Pacific and South America are slightly behind the North American pace.

NewStep's early focus has for that reason been on the European and North American markets. Gosselin says the company is in "detailed levels of discussions" with most major carriers in both regions, including carriers of all typesintegrated, cellular, fixed with MVNO (cellular reselling) operations, and even cable. "It's only a small handful of carriers that we're not deeply engaged with at this point," he says.

The integrated carriersthose with fixed and wireless networksand fixed carriers with MVNO operations appear to be moving slightly faster because they're most anxious to figure out how to leverage their assets, reduce churn, and increase ARPU (average revenue per user).

"But what's interesting and unique about F/MC [using NewStep's platform] when a broad array of services can be made available is that it enables all carriers to offer services," Gosselin says. Where most bundles are just discounting schemes, even the "single-mode" F/MC services possible with the NewStep platformsingle number, single voice mail, simultaneous ringing, wired-wireless call transfercan provide a significant competitive advantage, he argues.

Mobile carriers for the most part no longer fear that F/MC will simply "convert expensive wireless minutes into cheap Wi-Fi minutes," Gosselin says. They now are more likely to see it as a way to "win the lead-number race"as a way to encourage customers to switch to using their cell phone number as the main way to reach them. They also see Wi-Fi/cellular handoff as a way to improve the customer experience by providing better in-building coverage.

"One senior strategist at a large carrier in the U.S. told us recently that they found the whole Wi-Fi thing interesting because they were a proponent to getting another high-speed channel into the handset," Gosselin says. "This was so they could offload multimedia and content from their 3G and 4G networks and make them more efficient. Carriers are evolving in their understanding [of F/MC]. I can't remember the last time one said, 'Prove to me the business case for this.'"

2007 will be the year the first-movers move, the first half-dozen or so leading-edge service providerscompanies like British Telecom. "But one of the things that characterizes this space is the phenomenon of the 'fast follower,' " Gosselin says. "You have a few leaders who move quickly, and then everybody else has to move quickly after them." NewStep saw a large uptick in interest after the announcement of the British Telecom deal in February, he says.

Gosselin estimates there will be between 500,000 and two million F/MC subscribers globally by the end of 2007. That's not just subscribers to services offered by NewStep customers, but all end users actually subscribing to F/MC services. Next year, the roll-out will continue with the fast followers.

By the end of 2008, we'll no longer be surprised to see people in airports making calls on Wi-Fi, Gosselin says. (Not that we'll know they're on Wi-Fi if they're using a dual-mode device, of course.) Within a few years, the technology will be ubiquitous among the estimated 800 million "highly mobile" people around the world.

"They'll no longer be playing the multiple-number game," he predicts. "They'll have a single voice mail box." Eventually, he says, young people will "look back in bewilderment" at the current mode of communication where business people have two or three telephone numbers and have to check multiple voice mail boxes to keep in touch.

There is still work to be done developing and refining F/MC technologies, though. F/MC platform vendors like NewStep need to figure out how to smoothly manage presence information across multiple networks. And they have to figure out how to manage different communications "personas"so that employers can issue mobile devices to employees, which employees can then use after working hours for personal use, and pay for themselves. Employees don't want to carry two mobile devices, but employers don't want to pay for them to watch videos on their cell phones.

IP Multimedia Subsystem (IMS), an architectural framework for mobile networks originally developed by the 3GPP, will, when implemented by carriers, deliver F/MC functionality along with efficient delivery of multimedia services. NewStep very cannily architected its own solution to work within the IMS framework. But is it possible that some carriers will simply wait for pure-play IMS solutions and skip the interim step of implementing what NewStep is offering?

Gosselin, naturally, says no. "We're in discussions with a broad range of carriers, and the message we're getting is that IMS is a big, expensive capital deployment that holds great potential, but we're not sure of our timetable and we want to be able to offer some of these cool things now. Their customers are asking for them."

Carriers can implement the NewStep solution for prices starting in the low six figures, he says. And the company's pricing is geared to end subscriber levelsit succeeds only to the extent customers succeed.

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